The rise of early retirement in Europe is typically attributed to the European system of taxes and transfers. A model with an imperfectly competitive labor market allows us to consider also the effects of ... [more ▼]

The rise of early retirement in Europe is typically attributed to the European system of taxes and transfers. A model with an imperfectly competitive labor market allows us to consider also the effects of bargaining power and of matching efficiency on pre-retirement. We find that lower bargaining power of workers and declining matching efficiency have been important determinants of early retirement in France and Germany. These structural changes, combined with early-retirement transfers and population aging, are also consistent with the employment and unemployment rates, labor share and seniority premia. [less ▲]

The main objective is to examine the interactions between various sectors in the determination of wages. After a brief description of sectoral specificities in wage setting, the core of the project ... [more ▼]

The main objective is to examine the interactions between various sectors in the determination of wages. After a brief description of sectoral specificities in wage setting, the core of the project consists in estimating different wages functions taking into account wage spillovers across macro-sectors (manufacturing industry, finance, other services and public sector). To this end, we use quarterly sectoral data on four countries (Belgium, Luxembourg, France, Germany) over the period 1995-2014 and we estimate VAR-ECM and other econometric models addressing potential endogeneity problems. [less ▲]

The objective of this brief essay is to discuss Edmond Malinvaud’s contribution to the European macroeconomic policy debate, as it evolved from the early seventies till the early 2000’s. I start with the ... [more ▼]

The objective of this brief essay is to discuss Edmond Malinvaud’s contribution to the European macroeconomic policy debate, as it evolved from the early seventies till the early 2000’s. I start with the concepts of Keynesian vs classical unemployment and the consequences of real wage rigidities. I next review Malinvaud’s analysis of the low-skilled unemployment problem and his call for targeted labour tax exemptions. I close with a brief discussion of the respective role of macroeconomic and structural policies. [less ▲]

The historical evolution of the EU-US unemployment rate gap is often explained in the literature in terms of asymmetric changes in labour market institutions. Population aging is another potential source ... [more ▼]

The historical evolution of the EU-US unemployment rate gap is often explained in the literature in terms of asymmetric changes in labour market institutions. Population aging is another potential source of asymmetry. Asymmetric population aging may generate international capital flows and have a substantial impact on relative unemployment rates. In this paper, we examine whether the combination of institutions, aging and capital flows explains the rise in the gap between 1960 and 2010. To this end, we set up a two-region overlapping generation model with search unemployment in which we introduce the historical and projected changes in labour market institutions and demographic evolutions. We show that asymmetric institutional changes alone can reproduce a large part of the historical rise in the unemployment gap. However, this result does not hold anymore once we add asymmetric aging in closed economies. We are nevertheless able to restore and even improve the initial result when we allow for international capital mobility. [less ▲]

Modelling financial markets remains a main challenge in current macroeconomic theory. This paper summarizes the main difficulties and reasons why financial aspects were not included earlier in ... [more ▼]

Modelling financial markets remains a main challenge in current macroeconomic theory. This paper summarizes the main difficulties and reasons why financial aspects were not included earlier in macroeconomic models. It describes the main modelling strategies adopted so far, from financial accelerator models to financial intermediation and banking crises. It also discusses briefly different interpretations of the Great Recession. [less ▲]

This chapter focuses on labour market policies in the European Union in the aftermath of the Great Recession. Labour market policies have two objectives: promoting growth and welfare, and enhancing the ... [more ▼]

This chapter focuses on labour market policies in the European Union in the aftermath of the Great Recession. Labour market policies have two objectives: promoting growth and welfare, and enhancing the resilience to economic shocks. They are typically implemented through institutional arrangements like job protection legislation, unemployment insurance schemes, formal wage bargaining processes, and so on. Institutions are only slowly changed, and the same applies to the labour market’s. Pressures for changes are not new. They appeared with world globalisation and the development of knowledge-based economies. They gained strength however after 2010, three years after the start of the crisis. We explain the motivation for this shift and why it did not take place earlier in the crisis. Although this policy shift should be seen as a change of emphasis rather than a sudden change of paradigm, it may ultimately contribute to a complete overhaul of labour market institutions in the current context of world globalization. The chapter is organised as follows. We first document the main consequences of the crisis on income and employment, and the rise of inequalities and of cross-country imbalances. We next discuss how (in-)effective market mechanisms have been in paving the way towards recovery. Against that background, we discuss the motivation and the relevance of the economic policies implemented in EU countries. We distinguish two sub-periods, before and after 2010. Until 2010, the focus was on the « European Economic Recovery Plan » and its national counterparts. With the onset of the sovereign debt crisis and the implementation of EU-wide fiscal consolidation policies, the focus shifted towards labour market policies and « competitiveness recovery » plans. We discuss the contents and motivation of such plans, and the difficulty to implement them successfully at a time of fiscal austerity. We conclude the chapter with a discussion about conflicting economic paradigms and their connection with ongoing economic changes. [less ▲]

Automatic indexation mechanisms are often criticized for being a key source of inflexibility of actual real wages and thus responsible for a lack of adjustment to in the labour market and for a ... [more ▼]

Automatic indexation mechanisms are often criticized for being a key source of inflexibility of actual real wages and thus responsible for a lack of adjustment to in the labour market and for a deterioration of cost-competiveness. The aim of this study is to empirically assess whether this point of view is well founded. Statistical The Statistical and econometric research relates to four countries: two with institutionalized indexation of wages to consumer prices (Luxembourg and Belgium) and two without institutionalized indexation (Germany and France). this comparative econometric study, applied to four countries with or without indexation mechanisms, shows that the presence of institutionalized indexation does not significantly alter the process through which hourly wages are set, by observingas revealed by the long-term relationships or dynamic reactions to an exogenous shock. In other words, whilst differences in wage flexibility exist, their causes may be found elsewhere and not necessarily in automatic indexation mechanisms. Beyond the perimeter of this study, factors for the adjustment or inflexibility of wages might rather be sought in other directions, such as wages upon recruitment, inter-sector flexibility, the variable portion of remuneration, or changes in the composition of the labour force by sector, for example. [less ▲]